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Eurozone inflation hits 31-month high in November

Consumer prices in the 19-country currency bloc rose by 0.6% this month, the first time it has hit that level since April 2014

Gulf News

Brussels: Eurozone inflation rose to a two-and-half-year high in November as Europe moved further away from the very low consumer prices that have put an already fragile economic recovery under threat.

The level matched forecasts by analysts and will come as a relief to the European Central Bank which has embarked on a highly controversial and massive stimulus programme to boost inflation.

The Eurostat statistics agency on Wednesday said consumer prices in the 19-country currency bloc rose by 0.6 per cent this month, the first time it has hit that level since April 2014.

The Eurozone’s ultra-low inflation is a huge worry for the ECB, where the goal is to keep inflation near 2.0 per cent.

Inflation reflects underlying consumer demand in the economy and while still edging higher this month, 0.6 per cent means Europe is short of a full-fledged recovery.

Analyst Howard Archer said that core inflation — stripped of highly volatile food and oil prices — still remained far too low at 0.8 per cent.

“The muted November core inflation data highlight that the ECB cannot relax on the inflation front yet, even if the headline rate looks primed to rise appreciably over the next few months,” Archer of IHS Global Insight wrote.

World oil prices have crept up in recent months, snapping a long decline that destabilised the global economy and brought a spell of deflation to Europe.

More stimulus

ECB chief Mario Draghi earlier this month said the Eurozone’s tentative recovery remained heavily reliant on the bank’s monetary boost, fuelling expectations of more stimulus to come.

The fresh data appeared to only confirm that analysis with the ECB expected to announce an extension of its €80-billion a month bond-buying programme when the governing council next meets on December 8.

“We think that the ECB has more work to do to return Eurozone inflation to target on a sustained basis,” said Jack Allen, European Economist at Capital Economics.

The scheme, aimed at encouraging lending and investment, is currently scheduled to end in March.

Draghi said on Monday that other factors clouding the euro area’s prospects included the election of Donald Trump and Britain’s Brexit vote.

These changes “are quite profound and are going to affect the reality of not only the coming months but the coming years,” the ECB chief said.